Chris Rowe: Last week I wrote an article stating that the best time to buy on a dip is when the Relative Strength Indicator (RSI) generates a buy signal. So far, the S&P 500 still needs to decline a bit more before an RSI buy signal is even possible.
I wouldn’t be a buyer of anything until the S&P 500 does generate that buy signal. But the big question is: When the general stock market does see the “buy signal” you’ve been waiting for, what stocks should you buy?
The answer ties back into the technical approach that I use to find the best stocks and sectors to invest in. That approach is called “Relative Strength Investing.”
There are ultra-sophisticated ways to use relative strength, but today I’ll go over a “quick and dirty” method that my second-grader can follow. But don’t let the simplicity fool you. It’s still a very effective approach.
You simply note which stocks are not getting clobbered in the current market correction. When a stock or sector outperforms the general market, that means the stock or sector is showing positive relative strength. This reveals the areas of the market that aren’t only “rising with the tide,” but have strength of their own, without the help of broader market trends.
Let’s look at Netflix, Inc.(NASDAQ:NFLX), for example. It was the best-performing stock in the S&P 500 last year, up a whopping 298%.
It’s tough for investors to buy a stock that has already jumped(...)Click here to continue reading the original ETFDailyNews.com article: Buy High, Sell Higher [Netflix, Inc.]You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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